Monday, June 29, 2015

Over the last six blog posts we looked at eight different exit approaches for a standard RUT iron condor with 20 point wings. These exits included:

STD - NA%:NA% - exit at 8 DTE.

STD - NA%:50% - exit if the trade has a profit of 50% of its initial credit OR 8 DTE.

STD - 100%:50% - exit if the trade has a loss of 100% of its initial credit OR if the trade has a profit of 50% of its initial credit OR 8 DTE.

STD - 200%:50% - exit if the trade has a loss of 200% of its initial credit OR if the trade has a profit of 50% of its initial credit OR 8 DTE.

STD - 200%:75% - exit if the trade has a loss of 200% of its initial credit OR if the trade has a profit of 75% of its initial credit OR 8 DTE.

STD - 300%:50% - exit if the trade has a loss of 300% of its initial credit OR if the trade has a profit of 50% of its initial credit OR 8 DTE.

STD - 300%:75% - exit if the trade has a loss of 300% of its initial credit OR if the trade has a profit of 75% of its initial credit OR 8 DTE.

STD - 400%:50% - exit if the trade has a loss of 400% of its initial credit OR if the trade has a profit of 50% of its initial credit OR 8 DTE.

We applied these exits to iron condors with different delta short strikes (8, 12, 16, and 20 delta) at different days to expiration (38, 45, 52, 59, 66, and 80). Please see the following links for the background information associated with the results in this post:

Let's review the equity curves for four of the combinations listed above, to get a qualitative sense of the performance. Recall that the y-axis scale is the same for all of the equity curves (-200% to 1000%), except for the 16 and 20 delta variations of the 66 DTE trade (-200% to 1400%). The thumbnails are small, but larger images will be displayed if you click on them.

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With these equity curves as a qualitative reference, let's look at the associated trade metrics. The four tables below show the top 20 strategy variations (out of 192) in terms of selected metrics.

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The table above shows the top 20 strategies ordered by highest normalized average P&L per day. The 16 delta short strike trades were dominant in this category, with 10 of these strategies being associated with 16 delta short strikes. There were 6 at 20 delta and four at 12 delta. In terms of DTE for the top 20, there were 5 at 66 DTE, 7 at 59 DTE, and 8 at 45 DTE. Taking losses at 200% or 300%, and taking profits at 50% was how the trades with the highest normalized average P&L per day were traded.

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The table above shows the top 20 strategies with the highest normalized average P&L per trade. The 66 DTE, 16 and 20 delta variations took most of the top spots, as we would expect based on the equity curves. These top strategy variations tended to take losses at 200% or 300% and take profits at 75%, or simply carry the trades to 8 DTE without profit or loss exits.

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The table above lists the top 20 strategies ordered by their win rate. The top eight strategies all had win rates of 93%, short strikes at 8 delta, profit taking at 50%, and large loss exits (300%, 400%, or no loss limit at all (NA)). Most of the variations with win rates of 90% or more, typically had these features in common.

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The table above lists the top 20 strategies ordered by their Sortino Ratio. Eleven of these top 20 strategies were 66 DTE versions, with another 5 at 59 DTE. Nine of the top 20 were 8 delta short trike variations. Eleven took profits at 75% of the credit received.

Want a high Sortino Ratio - go with an 59 to 66 DTE, 8 delta short strikes, managing the profits at 75%, and managing the loss at 200%. Historically, this approach has averaged more than 5% per trade with a win rate at 87%.

Want a win rate - go with an 45 to 66 DTE, 8 delta short strikes, managing the profit at 50% and the loss at 400%. Historically, this approach has averaged around 4% per trade with a win rate of 93%.

Want the highest returns / return per trade - go with a 66 DTE, 16 or 20 delta short strikes, managing the profit at 75%, but the loss at either 200% or 300%. Historically, this approach has averaged over 11% per trade with a win rate of between 78% and 85%.

Want the highest returns per day - go with a 45 DTE, 16 delta short strikes. managing the profit at 50% and the loss anywhere from 200% to 400%. Historically, this approach has averaged over 6% per trade with a win rate of 83%.

In the next post, we will look at an even larger summary of RUT iron condor performance.

NOTE: Since the original posting, I have updated the tables above to exclude the metrics that were shown in dollar ($) terms. See the comments section for the explanation.

If you don't want to miss my new blog posts, follow my blog either by email, RSS feed or by Twitter. All options are free, and are available on the top of the right hand navigation column under the headings "Subscribe To RSS Feed", "Follow By Email", and "Twitter". I follow blogs by RSS using Feedly, but any RSS reader will work.

Thursday, June 18, 2015

This post looks at a standard (STD) one-lot iron condor on the Russell 2000 Index (RUT), initiated at 80 days-to-expiration (DTE). The results in this post were derived from approximately 3200 individual trades entered by the backtester.

In the trade metrics tables, I have highlighted some of the rows to indicate values that are in the upper half of the readings. One of the metrics to note is the average P&L per day in percentage terms (Trade Details (%) - Avg. P&L / Day). This is a measure of the P&L per day normalized to the maximum margin required for that trade run...it tells us the effectiveness of theta with respect to our margin requirement.

8 Delta Short Strikes

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For the 80 DTE, 8 delta RUT iron condors, the top exit approaches indicated by the metrics were: 200%:75%, 300%:50%, and 300%:75%.

12 Delta Short Strikes

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For the 80 DTE, 12 delta RUT iron condors, there were no clear winners in terms of metrics. The top exit approaches indicated by the metrics appear to be: NA%:NA%, 200%:75%, 300%:50%, and 300%:75%. Note: the NA%:50% and 400%:50% variations have nearly identical equity curves in the chart above.

16 Delta Short Strikes

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For the 80 DTE, 16 delta RUT iron condors, there were again no clear winners in terms of metrics. The the top exit approach indicated by the metrics appears to be the 300%:75% variation. Note: the NA%:50% and 400%:50% variations have nearly identical equity curves in the chart above.

20 Delta Short Strikes

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For the 80 DTE, 20 delta RUT iron condors, there were again no clear winners in terms of metrics. Note: the NA%:50% and 400%:50% variations have nearly identical equity curves in the chart above.

With the 80 DTE tests, the highest average P&L per day readings occurred with the 16 delta and 20 delta short strike variations. In the next post I will summarize the results from the last six blog posts.

If you don't want to miss my new blog posts, follow my blog either by email, RSS feed or by Twitter. All options are free, and are available on the top of the right hand navigation column under the headings "Subscribe To RSS Feed", "Follow By Email", and "Twitter". I follow blogs by RSS using Feedly, but any RSS reader will work.

Monday, June 15, 2015

This post looks at a standard (STD) one-lot iron condor on the Russell 2000 Index (RUT), initiated at 66 days-to-expiration (DTE). The results in this post were derived from approximately 3200 individual trades entered by the backtester.

In the trade metrics tables, I have highlighted some of the rows to indicate values that are in the upper half of the readings. One of the metrics to note is the average P&L per day in percentage terms (Trade Details (%) - Avg. P&L / Day). This is a measure of the P&L per day normalized to the maximum margin required for that trade run...it tells us the effectiveness of theta with respect to our margin requirement.

8 Delta Short Strikes

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For the 66 DTE, 8 delta RUT iron condors, the top exit approaches indicated by the metrics were: 100%:50%, 200%:75%, and 300%:75%.

12 Delta Short Strikes

(click to enlarge)

(click to enlarge)

For the 66 DTE, 12 delta RUT iron condors, the top exit approaches indicated by the metrics were: NA%:NA%, 200%:75%, and 300%:75%.

16 Delta Short Strikes

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The y-axis scale in the equity curve chart above has be increased to accommodate the larger returns for the 16 delta short strike variations. For the 66 DTE, 16 delta RUT iron condors, the top exit approaches indicated by the metrics were: NA%:NA%, 100%:50%, 200%:75%, and 300%:75%. Note: that the NA%:50% and 400%:50% variations have nearly identical equity curves in the chart above.

20 Delta Short Strikes

(click to enlarge)

(click to enlarge)

The y-axis scale in the equity curve chart above has be increased to accommodate the larger returns for the 20 delta short strike variations. For the 66 DTE, 20 delta RUT iron condors, the top exit approaches indicated by the metrics were: NA%:NA%, 100%:50%, 200%:75%, and 300%:75%. Note: that the NA%:50% , 300%:50%, and 400%:50% variations have nearly identical equity curves in the chart above.

With the 66 DTE tests, the highest average P&L per day readings occurred with the 20 delta short strike variations. In the next post we will look at these same deltas and exits, but on the RUT 80 DTE iron condor.

If you don't want to miss my new blog posts, follow my blog either by email, RSS feed or by Twitter. All options are free, and are available on the top of the right hand navigation column under the headings "Subscribe To RSS Feed", "Follow By Email", and "Twitter". I follow blogs by RSS using Feedly, but any RSS reader will work.

Thursday, June 11, 2015

This post looks at a standard (STD) one-lot iron condor on the Russell 2000 Index (RUT), initiated at 59 days-to-expiration (DTE). The results in this post were derived from approximately 3200 individual trades entered by the backtester.

In the trade metrics tables, I have highlighted some of the rows to indicate values that are in the upper half of the readings. One of the metrics to note is the average P&L per day in percentage terms (Trade Details (%) - Avg. P&L / Day). This is a measure of the P&L per day normalized to the maximum margin required for that trade run...it tells us the effectiveness of theta with respect to our margin requirement.

Please note that the dollar results below are based on 10 contract positions rather than the 1 contract positions used in the other posts in this series.

8 Delta Short Strikes

(click to enlarge)

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For the 59 DTE, 8 delta RUT iron condors, the top exit approaches indicated by the metrics were: 200%:75%, 300%:75%, and 400%:50%.

12 Delta Short Strikes

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For the 59 DTE, 12 delta RUT iron condors, the top exit approaches indicated by the metrics were: NA%:NA%, 200%:50%, and 200%:75%.

16 Delta Short Strikes

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For the 59 DTE, 16 delta RUT iron condors, there was not a clear winner in terms of metrics. The top candidates for exit approaches appear to be: 100%:50%, 200%:50% and 300%:50%. Note: the NA%:50%, 300%:50%, and 400%:50% variations have nearly identical equity curves in the chart above.

20 Delta Short Strikes

(click to enlarge)

(click to enlarge)

For the 59 DTE, 20 delta RUT iron condors, there was again no clear winner. The top exit approaches indicated by the metrics appear to be: 100%:50%, 200%:50%, and 200%:75%. Note: the NA%:50%, 300%:50%, and 400%:50% variations have nearly identical equity curves in the chart above.

With the 59 DTE tests, the highest average P&L per day readings occurred with the 16 delta and 20 delta short strike variations. In the next post we will look at these same deltas and exits, but on the RUT 66 DTE iron condor.

If you don't want to miss my new blog posts, follow my blog either by email, RSS feed or by Twitter. All options are free, and are available on the top of the right hand navigation column under the headings "Subscribe To RSS Feed", "Follow By Email", and "Twitter". I follow blogs by RSS using Feedly, but any RSS reader will work.

Monday, June 8, 2015

This post looks at a standard (STD) one-lot iron condor on the Russell 2000 Index (RUT), initiated at 52 days-to-expiration (DTE). The results in this post were derived from approximately 3200 individual trades entered by the backtester.

In the trade metrics tables, I have highlighted some of the rows to indicate values that are in the upper half of the readings. One of the metrics to note is the average P&L per day in percentage terms (Trade Details (%) - Avg. P&L / Day). This is a measure of the P&L per day normalized to the maximum margin required for that trade run...it tells us the effectiveness of theta with respect to our margin requirement.

8 Delta Short Strikes

(click to enlarge)

(click to enlarge)

For the 52 DTE, 8 delta RUT iron condors, the top exit approaches indicated by the metrics were: NA%:NA%, 200%:75%, and 300%:75%.

12 Delta Short Strikes

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For the 52 DTE, 12 delta RUT iron condors, the top exit approaches indicated by the metrics were: NA%:NA%, 200%:75%, and 300%:75%.

16 Delta Short Strikes

(click to enlarge)

(click to enlarge)

For the 52 DTE, 16 delta RUT iron condors, the top exit approaches indicated by the metrics were: 100%:50%, and 200%:50%. Note: the NA%:50% 300%:50%, and 400%:50% variations have nearly identical equity curves in the chart above.

20 Delta Short Strikes

(click to enlarge)

(click to enlarge)

For the 52 DTE, 20 delta RUT iron condors, the top exit approaches indicated by the metrics were: NA%:NA%, 200%:75%, and 300%:75%. Note: the NA%:50%, 300%:50%, and 400%:50% variations have nearly identical equity curves in the chart above.

With the 52 DTE tests, the highest average P&L per day readings occurred with the 20 delta short strike variations. In the next post we will look at these same deltas and exits, but on the RUT 59 DTE iron condor.

If you don't want to miss my new blog posts, follow my blog either by email, RSS feed or by Twitter. All options are free, and are available on the top of the right hand navigation column under the headings "Subscribe To RSS Feed", "Follow By Email", and "Twitter". I follow blogs by RSS using Feedly, but any RSS reader will work.

Friday, June 5, 2015

This post looks at a standard (STD) one-lot iron condor on the Russell 2000 Index (RUT), initiated at 45 days-to-expiration (DTE). The results in this post were derived from approximately 3200 individual trades entered by the backtester.

In the trade metrics tables, I have highlighted some of the rows to indicate values that are in the upper half of the readings. One of the metrics to note is the average P&L per day in percentage terms (Trade Details (%) - Avg. P&L / Day). This is a measure of the P&L per day normalized to the maximum margin required for that trade run...it tells us the effectiveness of theta with respect to our margin requirement.

Please note that the dollar results below are based on 10 contract positions rather than the 1 contract positions used in the other posts in this series.

8 Delta Short Strikes

(click to enlarge)

(click to enlarge)

For the 45 DTE, 8 delta RUT iron condors, the top exit approaches indicated by the metrics were: 200%:50%, , 200%:75%, and 300%:50%.

12 Delta Short Strikes

(click to enlarge)

(click to enlarge)

For the 45 DTE, 12 delta RUT iron condors, the top exit approaches indicated by the metrics were: NA%:50%, 200%:50%, 300%:50%, and 400%:50%.

16 Delta Short Strikes

(click to enlarge)

(click to enlarge)

For the 45 DTE, 16 delta RUT iron condors, the top exit approaches indicated by the metrics were: NA%:50%, 200%:50%, 300%:50%, and 400%:50%. Note: the NA%:50%, 300%:50%, and 400%:50% variations have nearly identical equity curves in the chart above.

20 Delta Short Strikes

(click to enlarge)

(click to enlarge)

For the 45 DTE, 20 delta RUT iron condors, the top exit approaches indicated by the metrics were: NA%:50%, 200%:50%, 300%:50%, and 400%:50%. Note: the NA%:50%, 300%:50%, and 400%:50% variations have nearly identical equity curves in the chart above.

With the 45 DTE tests, the highest average P&L per day readings occurred with the 16 delta short strike variations. In the next post we will look at these same deltas and exits, but on the RUT 52 DTE iron condor.

If you don't want to miss my new blog posts, follow my blog either by email, RSS feed or by Twitter. All options are free, and are available on the top of the right hand navigation column under the headings "Subscribe To RSS Feed", "Follow By Email", and "Twitter". I follow blogs by RSS using Feedly, but any RSS reader will work.

Wednesday, June 3, 2015

This post looks at a standard (STD) one-lot iron condor on the Russell 2000 Index (RUT), initiated at 38 days-to-expiration (DTE). The results in this post were derived from approximately 3200 individual trades entered by the backtester.

In the trade metrics tables, I have highlighted some of the rows to indicate values that are in the upper half of the readings. One of the metrics to note is the average P&L per day in percentage terms (Trade Details (%) - Avg. P&L / Day). This is a measure of the P&L per day normalized to the maximum margin required for that trade run...it tells us the effectiveness of theta with respect to our margin requirement.

8 Delta Short Strikes

(click to enlarge)

(click to enlarge)

For the 38 DTE, 8 delta RUT iron condors, the top exit approaches indicated by the metrics were: 200%:50%, 300%:50% and 300%:75%.

12 Delta Short Strikes

(click to enlarge)

(click to enlarge)

For the 38 DTE, 12 delta RUT iron condors, the top exit approaches indicated by the metrics were: 300%:50%, 300%:75%, and 400%:50%.

16 Delta Short Strikes

(click to enlarge)

(click to enlarge)

For the 38 DTE, 16 delta RUT iron condors, the top exit approaches indicated by the metrics were: NA%:NA%, 200%:75%, and 300%:75%.

20 Delta Short Strikes

(click to enlarge)

(click to enlarge)

For the 38 DTE, 20 delta RUT iron condors, the top exit approaches indicated by the metrics were: NA%:50%, 300%:50%, and 400%:50%.

With the 38 DTE tests, the highest average P&L per day readings were nearly tied between the the 12 and 20 delta short strike variations. In the next post we will look at these same deltas and exits, but on the RUT 45 DTE iron condor.

If you don't want to miss my new blog posts, follow my blog either by email, RSS feed or by Twitter. All options are free, and are available on the top of the right hand navigation column under the headings "Subscribe To RSS Feed", "Follow By Email", and "Twitter". I follow blogs by RSS using Feedly, but any RSS reader will work.

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